Bank of America told investors to ‘take profits.’ Then the Nasdaq fell 7%

Bank of America told investors to “take profits” on June 5, and many of them did. Savita Subramanian’s strategy team flagged seven of the firm’s 10 bear-market signposts—five already triggered by April, plus two more in May—and told clients to trim their winners. The firm sees the S&P 500 ending the year at 7,100, below where it trades now (at time of writing, 7,367). That note now makes Subramanian look like Nostradamus. The S&P 500 had set a record on June 1, four sessions before she published. By Wednesday’s close it was down about 4.5%, to 7,267. The Nasdaq had fallen roughly 7% from its own June 1 peak; the Dow about 2.7%, or some 1,400 points. Many of the funds that suffered the worst routs were the most leveraged. The Direxion Daily Semiconductor Bull 3X fund returned 75.9% in May and still bled $4.1 billion that month—a second straight month of outflows as traders cashed out of the year’s defining rally. The Philadelphia Semiconductor Index fell 10.3% on June 5–its worst day since 2020–after Broadcom’s cautious guidance and a memory glut handed the crowd a reason to sell. More than $1 trillion in market value evaporated in a single session. Micron, which sits at the center of the memory story, was hit hardest. A Monday bounce faded by Tuesday. By Wednesday the indexes were lower again, until rebounding on Thursday on stabilizing news in Iran. Underneath the headline indexes, the rotation is clear: out of the high-beta tech winners and into the boring stuff. Stocks fell Wednesday, but most of them rose—nearly 63% of issues advanced even as the Dow shed 950 points. The spread between the best- and worst-performing tech stocks is the widest since February 2000, Subramanian said. What were the signs? BofA tracks 10 conditions that tend to all trigger before an S&P 500 peak, sorted by sentiment, valuation, and macroeconomic. Both valuation signals were lit. The first is the Rule of 20: Add the market’s price-to-earn